Supreme Court Upholds 90,000 Tax Reassessment Notices Issued Under Previous Regime in Landmark Verdict

Supreme Court Upholds 90,000 Tax Reassessment Notices Issued Under Previous Regime in Landmark Verdict

The Supreme Court (SC) has upheld the validity of over 90,000 tax reassessment notices issued between April and June 2021 under the old reassessment regime, marking a significant ruling that could impact thousands of taxpayers. These notices, issued under Section 148 of the Income-Tax Act, pertain to alleged under-reporting and misreporting of income from assessment years 2013-14 to 2017-18.

The apex court's ruling follows a similar verdict delivered in May 2022, which involved an individual case (Ashish Agarwal). In its latest judgment, the court extended that decision to apply to all assessment notices issued during the contested period. This decision effectively nullifies various high court orders that had previously stayed or invalidated these reassessments.

Background of the Case

When the new reassessment law came into effect on April 1, 2021, it reduced the period for reopening past cases to three years from the previous six years. However, the tax department continued to issue notices under the old regime for prior years, citing a government notification that extended the time limit for issuing reassessment notices due to pandemic-related disruptions.

The overlap of the old and new regimes for reassessment during the April-June 2021 period created confusion, leading to over 9,000 writ petitions being filed by assessees across various courts, challenging the validity of these notices.

Key Highlights from the Judgment

A three-judge bench, led by Chief Justice D.Y. Chandrachud, clarified that the notices issued between April 1 and June 30, 2021, were valid, based on the court's earlier ruling in the Ashish Agarwal case. The bench emphasized that preventing a loss to the public exchequer was central to the court's decision.

The court also addressed concerns about taxpayers receiving show-cause notices during this period. It ruled that the timeframe for such notices would be suspended until relevant information and materials were supplied by the assessing officers, allowing two additional weeks for taxpayers to respond.

Industry Reactions

Nikhil Tiwari, tax partner at EY India, commented that this ruling would primarily affect assessment years from 2013-14 to 2017-18. S.R. Patnaik, head of taxation at Cyril Amarchand Mangaldas, noted that many taxpayers felt unfairly targeted by these notices, but the court's judgment has now validated them.

Meanwhile, Rishabh Malhotra, counsel at DMD Advocates, highlighted that while the ruling brings clarity, taxpayers who challenged the reassessments on grounds other than the time limit could still find some relief.